Former leading New Zealand publisher and bookseller, and widely experienced judge of both the Commonwealth Writers Prize and the Montana New Zealand Book Awards, talks about what he is currently reading, what impresses him and what doesn't, along with chat about the international English language book scene, and links to sites of interest to booklovers.

Saturday, February 16, 2013

S&S Finishes with Soft Sales But Growing Profits; Denies Sale Rumors

PublishersLunch

CBS reported fourth quarter earnings after
the close of the market on Thursday, with Simon & Schuster recording a 6
percent decrease in sales, down $14 million to $215 million. Consistent with
their recent pattern, however, profits rose even with lower sales. Adjusted
OIBDA gained $3 million (or 11 percent) to $31 million, and adjusted operating
income rose $2 million, at $27 million. S&S took a $3 million restructuring
charge this quarter related to their realignment into new "publishing
groups" and the elimination of some positions. (This time a year ago they
took a $2 million charge.)

As usual, CBS stated that the improvement
in income was "principally driven by lower expenses resulting from the
growth in more profitable digital book sales as a percentage of total
revenues." CEO Carolyn Reidy explained to us that "the biggest effect
on the P&L of the move to digital...is the lack of returns" and
"that's where a lot of the money is being saved." She attributes
roughly "50 percent of the increase in profitability" in recent years
to the rise of digital sales and its reduction on publishing costs, "and
the other half is that after recession hit us in the jaw we've been assiduous
in our processes...and figured out how to take costs out of the business."

With ever-growing but unsourced rumors
inside publishing claiming that a sale to News Corp. is in process, Reidy
responded clearly, "I have been assured it's not true." She added
more broadly: "We don't believe we are for sale. CBS has said to us and
said publicly many times that they like having publishing as part of their
portfolio, and they like their position in the industry."

Digital sales accounted for 24 percent of
fourth quarter revenue for S&S, a 24 percent increase from a year ago (and
another example of the overall slowdown in digital growth for trade publishing
in 2012). As for the recent return to discounting of some ebook titles as a
result of the DOJ settlement, Reidy said that "from what we can see, it's
having very little effect on any consumer behavior," either digital or
physical purchases.

As in previous quarters, S&S's
international and children's divisions "did very well" as did audio,
while adult books "comparatively had the toughest quarter and year,"
in part because of the comparison to Walter Isaacson's STEVE
JOBS and Stephen King's 11/23/63
a year ago. Key betsellers for the quarter were Eben Alexander's PROOF
OF HEAVEN and Vince Flynn's THE
LAST MAN.

Reidy celebrated the launch of Bookish and
looks forward to the addition of more features still in development. On goals
for the site in its first year of operation, Reidy said if Bookish can build
"good, strong traffic and it it's making enough sales, either by itself or
through referrals, to be self-supporting, I will consider it a big
success." She added that "if it can increase the conversation about
books in any way, shape or form" the site will have made an important
contribution.

Simon
& Schuster's results for the full year point in the opposite direction of
the fourth quarter numbers: sales increased by $3 million (or 1 percent) to
$790 million, as adjusted OIBDA was down $3 million to $89 million and adjusted
operating income also dropped by the same amount to $80 million. But those
income figures suffered from over $20 million paid out for the settlement of
the states' lawsuit, as well as legal costs related to all the investigations.Release